German Economist: ‘Stand Up for the Abolition of Cash,’ Stand Up for Central Banks
A week after the announcement by the Central Bank of Denmark to abolish the printing of cash by 2016
A week after the announcement by the Central Bank of Denmark to abolish the printing of cash by 2016, Peter Bofinger, a German economist and member of the German Council of Economic Experts, made a similar proposal to the German federal government. He said:
“Stand up for the abolition of cash, since coins and bills are obsolete and only reduce the influence of central banks.”
In an interview with the German magazine and news site Spiegel, Bofinger, an economics professor at the University of Würzburg, stated, “In today’s technical possibilities, coins and notes are in fact an anachronism. Just remember how much time is wasted everyday searching for spare change or waiting for the cashier.”
As the only proponent of Keynesian economics in the Council of Economic Experts, Bofinger explained in the interview that abolishing cash would make it much easier for central banks to control payments and enforce its monetary policy.
Although Germany has a substantially low credit card penetration rate compared to other European nations, a group of Canadian banking experts called Pacnet Services, stated that Germany “is one of the worldwide leaders in B2C e-commerce sales, ranked fifth place internationally.”
Moreover, Ecommerce Europe, an association representing more than 25,000 companies selling products online, reported that “the country is one of the three dominant e-commerce industries in Europe, at $50 billion euro net worth, roughly US$66 billion. 6.4 percent of traditional retail purchases now occur online in the country.”
According to reddit comments however, debit cards are far more popular than credit cards in Germany. The majority of e-commerce shoppers link their debit card to e-wallets and transact using mobile platforms. One redditors stated, “Everyone in Germany uses cash! Most shops don't even accept cards. It's one of the most cash-driven economies left in the developed world,” and another said, “Well, here in Germany credit cards aren't as popular as debit cards. A lot of places don't accept credit cards anymore.”
Pacnet explained that both shoppers and merchants in Germany’s e-commerce industry use bank-managed office credit transfers and e-wallets instead of credit cards.
Denmark’s Central Bank to Abolish Printing of Cash by 2016
Bofinger’s campaign follows a recent announcement by the central bank of Denmark that they plan to abolish the printing of cash by 2016. According to National Banken, the demand for banknotes is declining in Denmark, while the usage of e-wallets, credit cards, mobile payment platforms and digital currency is rapidly increasing. The central bank also added that, if necessary, printing of new notes will be outsourced to private companies.
Along with Denmark and Germany, Belgium is also showing determination to switch from fiat to virtual-cash-based economies. Economist Konstantin Gurdgiev explained in an interview with RT:
“It’s a global trend in the sense the Central Banks around the world, especially in Europe, not just in Denmark, but also in Ireland, for example, Austria, Belgium have been trying for a number of years to shift the economies or convert the economies away from using physical cash in transactions and using paper in transactions to electronic payments.”
Given that Germany is a “dominant e-commerce industry,” a move to abolish the printing of cash could be a feasible plan for its government. However, Bofinger received criticism from Spiegel magazine, which stated, “The elimination of cash will not solve our problems.”